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John D. Thomason
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I am a retired (as of September 2001) IT manager. While I have always followed the markets, during my IT career my market research time was limited. Upon retiring, I have focused full-time on the markets and my own market education and growth. I have evolved my investment/trading strategy over... More
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  • Molson Coors - A Great Covered Call Candidate  0 comments
    Dec 12, 2012 9:24 AM | about stocks: TAP

    The following is from my Daily Blog posting for Wednesday, 12/12/2012, available at my website, OptimumStockInvesting.com.

    With the market again being up for an extended period, climbing the proverbial "wall of worry", I start looking at my holdings for sell candidates, or covered call write candidates. I settled on Molson Coors (NYSE:TAP) yesterday (12/11/2012), selling a July 2013 call, strike price $45, for $2.25, with TAP trading in the $43.50 range. For most stocks, a strike more than $1.00 above the current trade level will seldom pay as much as $1.00, even going out several months. For some reason, TAP offers more than double the usual return. Don't ask me why, I guess the options market makers either drink a lot of Molson or Coors beer, or they figure the rest of the country will do so. I had previously sold a January 2013 $45 strike call on 9/5/2012, also for $2.25, and then bought it back on 11/9/2012, for $0.35, for a gross profit of $190.00, achieved in only two months. TAP was trading at $44.70 when the earlier call was sold, and at $41.33 when it was covered. TAP pays a decent, but not great, dividend of $0.32/share quarterly, yielding slightly under 3% at today's trading level. While the stock makes the cut, barely, as a dividend payer, it really is only worth owning for the covered call income, at least as far as I'm concerned. Of course, this phenomenon likely is not permanent. If TAP drops again like it did last fall, the relatively generous call prices may not be forthcoming the next time around. On the other hand, it might go up over $50, in which case the options market would be proven smarter than I thought, and obviously, smarter than me. If that happens, while I undoubtedly will regret the forgone capital gain on the shares, I won't cry too much over selling a dividend payer that is only yielding 2.6%, which would be the case at a share price of $50. Stay tuned, I will post to my blog how this second TAP covered call trade works out, when I close the option position.

    Disclosure: I am long TAP.

    Additional disclosure: I also sell covered calls against my long stock position in TAP.

    Stocks: TAP
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